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Monday, October 23, 2006

NetFlix Leaps Past Estimates

Shares of Netflix (NFLX) are up over 13% to over $26.00 in after-hours trading after reporting earnings. The company ended with 5.662 million users, posted net income of $12.8 million on revenues of $256 million. Non-GAAP EPS was listed as $0.21. Its churn dropped to 4.2%, but its client acquisition costs grew to $45.32. Of the 5.662 million subscribers, 5.489 million were paid subscribers.

Shares of Netflix (NFLX) closed up almost 4%, or $0.78, in regular trading at $23.08 on the day, up substantially from last quarter. After its earnings last quarter the company and its investors saw shares fall 21% in one day to close down at $18.78 after earnings. It beat EPS targets when it reported in July but fell just short on revenues last quarter and it lowered guidance and posted higher acquisition costs.

Compared to last quarter:

It had 5.17 million subscribers as of last quarter. Its subscriber acquisition costs grew roughly 14% year over year and even quarter or quarter. Its churn rate was down slightly last quarter to a rate of 4.3% for the quarter.

Its guidance previously offered with prior earnings:

5.5 to 5.7 million subscribers; $5 million to $10 million in net income on revenues of $249 million to $254 million (previor street target was $258+ million); 20 million subscribers by the 2010 to 2012 timeframe. It even gave a Q4 forecast year-end subscriber target of 6.3 million users.

OUTLOOK for next quarter:
6.3 million paid subscribers, revenues $273 to $278 million (above last forecast), GAAP net income of $7.5-$13.5 million.

OUTLOOK for 2007:
Netflix gave $55 to $60 million for GAAP Net Income targets in 2007, roughly $0.76 to $0.83 dilued EPS.

Jon C. Ogg

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